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I do wonder what will happen once Uber starts charging market rates. Right now, your ride is subsidized by Uber. Once it comes time to turn on the profits, you'

I do wonder what will happen once Uber starts charging market rates. Right now, your ride is subsidized by Uber. Once it comes time to turn on the profits, you'll have to pay more - substantially more in some markets. Will you still use Uber? Probably. But many who started using Uber instead of, say, taking their own car or using public transport, just might go back.

everly 11y ago
I suspect that the data they possess on usage rate during surge pricing will be extremely useful for making those projections.
- danieltillett 11y ago
  Yes it should be possible to modelled this out from the surge data. Of course you have to be careful doing this sort of modelling since you might find your model won’t support a $50 billion valuation.
  - venomsnake 11y ago
    No it should not. Because surge pricing requires supply crunch. But the moment they jack day to day prices you will have supply glut. And creating an Uber like app for just one city is not that hard.
    - danieltillett 11y ago
      Surge pricing allows you to model the price elasticity of the service. You can do all sorts of experiments and regression analysis on this data. If I had access to the data I could tell you exactly how elastic the pricing is. The problem is not that you can't extract the price elasticity from the surge pricing of an Uber-like service, it is that you might not like the answer. Down rounds are not nice to founders.
danieltillett 11y ago
This is actually something that is pretty straightforward to find out (assuming you actual want to know the answer). You just jack up the prices in a single market and see how much price elasticity there is. My feeling is that the taxi-like market is a commodity market, but if I was going to invest at a $50 billion valuation I would want Uber to tell me that have looked into this in detail and can provide me with some hard data.
aikah 11y ago
> I do wonder what will happen once Uber starts charging market rates. That's an excellent question and the answer is it wont be cheap. That's why, in countries where Uber operates, a clear legal framework is needed so that Uber doesn't end up with a monopoly. If Uber is allowed to operate somewhere then anybody should be able to do that without the need for an army of lawyers and lobbyists or it's just replacing the old boss with a new boss and in the end nothing's going to change for the consumer. That's what I hate with the whole situation.
- sbank 11y ago
  Private monopolies are largely unproblematic as they will be destroyed by more effective competitors eventually. I'm way more afraid of government monopoly. Point in case: The protectionism and government interference that has kept the taxi business shitty for so long.
  - wfo 11y ago
    Private monopolies are in some theoretical circumstances unproblematic because according to extremist free-market ideologues they are destroyed by more effective competitors. In reality they are broken up by governments, regulated into the ground, or destroy a nation/society, and they manage to make a society/market a whole lot worse before this long-term and extreme regulatory action obliterates them and fixes the problem.
    - puranjay 11y ago
      > they manage to make a society/market a whole lot worse I can imagine this argument holding true for resource-based businesses, say, oil and gas. I can't imagine a taxi services aggregator having that substantial an impact on a nation
      - wfo 11y ago
        You're right the argument is less strong for a non-natural monopoly, but Microsoft, say, when they had a monopoly, held back computing by years and we're still seeing the aftereffects of their monopoly; it has warped an entire industry in not only the US but the world.
morgante 11y ago
> I do wonder what will happen once Uber starts charging market rates. Right now, your ride is subsidized by Uber. Do you have any evidence of that? I'm 99% sure Uber is profitable on a unit and customer basis.
- krrrh 11y ago
  There is evidence of this all over the press if you want to search for it. Take for instance The 'non-profit' "People's Uber" in China. They guaranteed wages for drivers and capped rates at auto rickshaw prices. This spring in Guangzhou I was taking 20 minute rides and paying around $1.50. It was ridiculous. While they were trying to maintain a foothold in Germany as more than a legal taxi hailing service (which is what they are now, competing with apps like mytaxi) they were limiting prices to legal Mitfahrgelegenheit (private ride share) prices. What was normally a 70€ cab ride between Düsseldorf and Köln cost 12€ (Less than taking the regional train for 1 person though the driver was paid much more of course. This went on for months. I'm sure they are making money in markets where the existing taxi service was truly dreadful and where they don't have to compete on price and have been able to raise their rates to on par or higher than taxi rates, but they are definitely paying a price for expansion.
  - morgante 11y ago
    > they are definitely paying a price for expansion. Of course, that's the whole reason to raise capital (so you can expand rapidly on a model which has attractive unit economics). The point is that we don't have to speculate about what will happen once Uber raises prices. Just look at their mature markets, where pricing is on par with taxis, and you can see a profitable model.
    - krrrh 11y ago
      I think that the profitability in mature markets has a lot to do with how sane existing taxi regulations are. Even with the subsidized prices in Berlin, taxis there are so plentiful and relatively affordable that aside from heavily subsidized rides Uber didn't have a huge edge over the taxi+mytaxi combo. It was never really faster to get a car via Uber than with MyTaxi, or more often than not, just walking to the street and waiting 1-2 minutes. They've never had close to the same participation from Taxi drivers as MyTaxi and others have had. Incidentally, most Berlin Taxis are independent and pay only a small fee to get licensed. They must carry commercial insurance, but almost no one thinks that is unreasonable. It's ironic because if the cities where Uber is madly profitable actually responded to their criticisms and reformed their protectionist taxi regulations, Uber would lose much of their pricing edge to competition.
danielweber 11y ago
Uber is making money off of each ride. "Money they charge the end user" minus "money they pay to the driver" is a value that increases significantly each quarter. They have a bunch of other expenses, but those are expected to lessen in the future. Training (of both customers and drivers) should fall to near-zero, for example, over time.

everly 11y ago

I suspect that the data they possess on usage rate during surge pricing will be extremely useful for making those projections.

danieltillett 11y ago
Yes it should be possible to modelled this out from the surge data. Of course you have to be careful doing this sort of modelling since you might find your model won’t support a $50 billion valuation.
- venomsnake 11y ago
  No it should not. Because surge pricing requires supply crunch. But the moment they jack day to day prices you will have supply glut. And creating an Uber like app for just one city is not that hard.
  - danieltillett 11y ago
    Surge pricing allows you to model the price elasticity of the service. You can do all sorts of experiments and regression analysis on this data. If I had access to the data I could tell you exactly how elastic the pricing is. The problem is not that you can't extract the price elasticity from the surge pricing of an Uber-like service, it is that you might not like the answer. Down rounds are not nice to founders.

danieltillett 11y ago

This is actually something that is pretty straightforward to find out (assuming you actual want to know the answer). You just jack up the prices in a single market and see how much price elasticity there is. My feeling is that the taxi-like market is a commodity market, but if I was going to invest at a $50 billion valuation I would want Uber to tell me that have looked into this in detail and can provide me with some hard data.

aikah 11y ago

> I do wonder what will happen once Uber starts charging market rates. That's an excellent question and the answer is it wont be cheap. That's why, in countries where Uber operates, a clear legal framework is needed so that Uber doesn't end up with a monopoly. If Uber is allowed to operate somewhere then anybody should be able to do that without the need for an army of lawyers and lobbyists or it's just replacing the old boss with a new boss and in the end nothing's going to change for the consumer. That's what I hate with the whole situation.

sbank 11y ago
Private monopolies are largely unproblematic as they will be destroyed by more effective competitors eventually. I'm way more afraid of government monopoly. Point in case: The protectionism and government interference that has kept the taxi business shitty for so long.
- wfo 11y ago
  Private monopolies are in some theoretical circumstances unproblematic because according to extremist free-market ideologues they are destroyed by more effective competitors. In reality they are broken up by governments, regulated into the ground, or destroy a nation/society, and they manage to make a society/market a whole lot worse before this long-term and extreme regulatory action obliterates them and fixes the problem.
  - puranjay 11y ago
    > they manage to make a society/market a whole lot worse I can imagine this argument holding true for resource-based businesses, say, oil and gas. I can't imagine a taxi services aggregator having that substantial an impact on a nation
    - wfo 11y ago
      You're right the argument is less strong for a non-natural monopoly, but Microsoft, say, when they had a monopoly, held back computing by years and we're still seeing the aftereffects of their monopoly; it has warped an entire industry in not only the US but the world.

morgante 11y ago

> I do wonder what will happen once Uber starts charging market rates. Right now, your ride is subsidized by Uber. Do you have any evidence of that? I'm 99% sure Uber is profitable on a unit and customer basis.

krrrh 11y ago
There is evidence of this all over the press if you want to search for it. Take for instance The 'non-profit' "People's Uber" in China. They guaranteed wages for drivers and capped rates at auto rickshaw prices. This spring in Guangzhou I was taking 20 minute rides and paying around $1.50. It was ridiculous. While they were trying to maintain a foothold in Germany as more than a legal taxi hailing service (which is what they are now, competing with apps like mytaxi) they were limiting prices to legal Mitfahrgelegenheit (private ride share) prices. What was normally a 70€ cab ride between Düsseldorf and Köln cost 12€ (Less than taking the regional train for 1 person though the driver was paid much more of course. This went on for months. I'm sure they are making money in markets where the existing taxi service was truly dreadful and where they don't have to compete on price and have been able to raise their rates to on par or higher than taxi rates, but they are definitely paying a price for expansion.
- morgante 11y ago
  > they are definitely paying a price for expansion. Of course, that's the whole reason to raise capital (so you can expand rapidly on a model which has attractive unit economics). The point is that we don't have to speculate about what will happen once Uber raises prices. Just look at their mature markets, where pricing is on par with taxis, and you can see a profitable model.
  - krrrh 11y ago
    I think that the profitability in mature markets has a lot to do with how sane existing taxi regulations are. Even with the subsidized prices in Berlin, taxis there are so plentiful and relatively affordable that aside from heavily subsidized rides Uber didn't have a huge edge over the taxi+mytaxi combo. It was never really faster to get a car via Uber than with MyTaxi, or more often than not, just walking to the street and waiting 1-2 minutes. They've never had close to the same participation from Taxi drivers as MyTaxi and others have had. Incidentally, most Berlin Taxis are independent and pay only a small fee to get licensed. They must carry commercial insurance, but almost no one thinks that is unreasonable. It's ironic because if the cities where Uber is madly profitable actually responded to their criticisms and reformed their protectionist taxi regulations, Uber would lose much of their pricing edge to competition.

danielweber 11y ago

Uber is making money off of each ride. "Money they charge the end user" minus "money they pay to the driver" is a value that increases significantly each quarter. They have a bunch of other expenses, but those are expected to lessen in the future. Training (of both customers and drivers) should fall to near-zero, for example, over time.